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Micron Technology Management Discusses Q3 2012 Results - Earnings Call Transcript

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  • 1. SEEKING ALPHA
  • 2. Micron Technology Management Discusses Q3 2012 Results - Earnings Call TranscriptEXECUTIVES Kipp A. Bedard - Vice President of Investor Relations D. Mark Durcan - Chief Executive Officer and Director Ronald C. Foster - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance Mark W. Adams - President
  • 3. ANALYSTS James Schneider - Goldman Sachs Group Inc., Research Division Alex Gauna - JMP Securities LLC, Research Division Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division Shawn R. Webster - Macquarie Research Christopher J. Muse - Barclays Capital, Research Division Ada Menaker - MKM Partners LLC, Research Division Uche X. Orji - UBS Investment Bank, Research Division Brian C. Peterson - Raymond James & Associates, Inc., Research Division Micron Technology (MU) Q3 2012 Earnings Call June 20, 2012 4:30 PM ET
  • 4. Operator Good afternoon. My name is Huey, and Ill be your conference facilitator today. At this time, Id like to welcome everyone to Micron Technologys Third Quarter 2012 Financial Release Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Kipp Bedard. Sir, you may begin your conference.
  • 5. Kipp A. Bedard Thank you very much. Id also like to welcome everyone to Micron Technologys Third Quarter 2012 Financial Release Conference Call. On the call today is Mark Durcan, CEO and Director; Mark Adams, President; and Mr. Ron Foster, Chief Financial Officer and Vice President of Finance. This conference call, including audio and slides, is also available on Microns website at micron.com. If you have not had an opportunity to review the third quarter 2012 financial press release, again it is available on our website at micron.com. Our call will be approximately 60 minutes in length. There will be an audio replay of this call, accessed by dialing (404) 537-3406 with a confirmation code of 90798592. This replay will run through Wednesday, June 27, 2012 at 5:30 p.m. Mountain Time.
  • 6. A webcast replay will be available on the companyswebsite until June 2013. We encourage you tomonitor our website, again at micron.com throughoutthe quarter for the most current information on thecompany, including information on the variousfinancial conferences that we will be attending.Please note the following Safe Harbor statement.During the course of this meeting, we may makeprojections or other forward-looking statementsregarding future events or the future financialperformance of the company and the industry. Wewish to caution you that such statements arepredictions and that actual events or results maydiffer materially. Well refer you to the documents thecompany files on a consolidated basis from time totime with the Securities and ExchangeCommission, specifically the companys most recentForm 10-K and Form 10-Q.
  • 7. These documents contain and identify importantfactors that could cause the actual results for thecompany on a consolidated basis to differmaterially from those contained in our projectionsor forward-looking statements. These certainfactors can be found in the Investor Relationssection of Microns website. Although we believethat the expectations reflected in the forward-looking statements are reasonable, we cannotguarantee future results, levels ofactivity, performance or achievements. We areunder no duty to update any of the forward-looking statements after the date of thepresentation to conform these statements toactual results. Ill now turn the call over to MarkDurcan. Mark?
  • 8. D. Mark Durcan: Thanks, Kipp. Id like to start today by giving a brief overview of the quarter, including some color on where we performed well and where we need to improve our execution. After some thoughtful discussion on company strategy, Ill turn it over to Ron for financial summary, and well close our preliminary comments with Mark Adams providing an update on the market conditions and key developments in our business units. Revenue in the quarter was -- obviously exceeded expectations as a result of solid manufacturing performance and good work on inventory improvement by our business units and sales force. There is yet room for improvement on inventory management, but it was certainly gratifying to see the results this quarter.
  • 9. And with the closing of the Intel debut restructuring, we expect benefit from an ongoing structural improvement in our NAND inventory turns. In the quarter, we completed the rollout of a new supply-chain management infrastructure and though there were a few inevitable bumps along the way, the process is complete and we look forward to building from here to new levels of customer service and responsiveness. The 30- nanometer DRAM yield ramp picked up steam during the quarter in all 3 DRAM manufacturing facilities, and is now focused predominantly on higher-density 4-gigabit DRAM products.
  • 10. The technology team made solid progress on a number of new technology nodes including NAND, DRAM, NOR, PCM and some emerging memory part types. The DRAM market found its footing during the quarter and while NAND market softened significantly, since quarter end weve seen its improved stability here also. Mark Adams and Ron Foster will comment more on all these areas. Given the current memory industry climate and changes here over the last 4 months, Id like to spend a few minutes sharing some thoughts on the opportunities currently presenting themselves to Micron and our path forward. Two weeks ago, I marked my 25th anniversary at Micron. When I started, we had one 5-inch wafer fabs and goats grazing out the front. Ive clearly seen many changes in the company, as well as in the competitive landscape of our industry. One constant has been Micron emerging from tumultuous times as not only a survivor, but a stronger company.
  • 11. While the memory markets are obviously somewhat soft currently, we believe they are bottoming and we will have the wind more to our backs moving into the second half of the year. Weve taken steps over the years to broaden our product portfolio, improve our cost competitiveness, strengthen our technology position and capitalize on the right strategic opportunities when they arise. It is my intent to continue to move in this direction. My focus is on building an operating and financial model that can deliver sustainable free cash flow and dependable ROI. There are many levers to pull in order to achieve these goals. As always technology, capital efficiency, product differentiation, close customer engagement, effective sales channels, timely and low- cost investment and manufacturing efficiency and effectiveness are key to optimizing our results.
  • 12. In addition, however, being cognizant of and reactingappropriately to memory industry supply and demanddynamics is important to achieving this result. Therescurrently considerable interest, of course, in whetherMicron will consummate the purchase of Elpida, whichrepresents 15% to 20% of the DRAM industry capacity. Asmost of you are aware, we announced previously that wewere selected to negotiate exclusively to become thesponsor for Elpida in the bankruptcy process. We are in aunique strategic and financial position to take a look at thisopportunity and are interested in pursuing it, if it can bedone under the right terms and conditions. In mymind, these include making sure we do not unnecessarilydilute our equity nor incur excessive interest-bearing debtthat might overly hamper our flexibility moving forward. Adeal with Elpida in this context should enhance our scaleand operating expense efficiency.
  • 13. Elpida also has a strong product portfolio, leading-edgetechnology, strong IP and talented workforce. I think ourtrack record of successful M&A transactions, which by theway includes avoiding deals which do not fit financially andstrategically, speaks for itself. . If a deal cannot be done onterms that are acceptable to us, I want to emphasize thatwere also comfortable with our organic opportunities. Ourcustomer base is fantastic and almost all are looking to domore business